Audit: Palo Alto needs stronger cash oversight

Palo Alto's cash-handling operations are riddled with errors and discrepancies and have insufficient security, a new audit by City Auditor Lynda Brouchoud's office has found.

The audit, which looked at the city's cash handling and travel expenses, found that the city needs "stronger controls for cash-handling operations" and "increased oversight" in travel-expense process.

The city, which offers utility services and a myriad of recreational programs, has more than 20 locations where workers regularly process cash, according to the audit. These include the Development Center, where builders pay their fees and submit their applications; the Utilities Customer Service where residents pay for their gas and electricity; and Foothill Park, where people can rent a canoe.

Not all of the workers at these various locations are adequately trained for handling cash, the audit found. Auditors reviewed 13 cash-handling locations and evaluated their "internal controls" in three areas: segregating cash-handling duties, safeguarding revenues and properly documenting all transactions. The city's Revenue Collection service, which is operated by the Administrative Services Department and which handles about $86.9 million, met the auditor's standards in all three categories.

Smaller operations had a harder time meeting the auditor's criteria. The city's Animal Services department failed to meet the standards in all three categories, while the Children's Theatre (whose cash-handling operations were at the center of a recent citywide scandal) met the necessary standards in the "segregation" category, but did not meet them in the other two.

More than half of the areas surveyed had deficiencies related to safeguarding revenue, the report stated.

Auditors also conducted surprise cash counts at three locations. Two of them had incorrect cash balances (though the differences were only $5), while the third one processed an incorrect deposit slip (the city's accounting group later corrected the error).

The audit points out that the city has a largely "decentralized" cash-handling framework and an "outdated" cash-handling policy. The report recommends the city's Administrative Services Department to update the policy and provide "sufficient guidance" to revenue collectors throughout the city on "internal controls related to cash handling.

The report also stated that the city "should improve training and implement a more proactive oversight program for cash-handling operations."

The report also scrutinized how well the city keeps track of employees' expenses and found that city workers have plenty of room for improvement. Auditors looked at 40 purchases made by city workers through the CAL-Card (credit cards used for city business) and found "exceptions" in 27 of them (or 68 percent).

Most of these exceptions were related to "incomplete travel forms or inadequate documentation." In one case, a transaction appeared to have been reimbursed twice.

The audit also reviewed "Executive Staff" credit cards, which are issued to department heads, and found that about a quarter of the purchases were missing travel forms or receipts.

"This lack of documentation makes it difficult to ensure the expenses were properly authorized and in compliance with City policies," the audit stated.

The report also cites seven cases in which workers used their Executive Staff cards to pay for meals of people who weren't city workers. Though the amount of these meals was "not significant, the public perception of paying for non-employee meals can be a concern."

The auditors' site visits "revealed weaknesses that should be immediately addressed," the report states. It offers 11 recommendations, including consolidating Executive Staff credit cards into the CAL-Card program; performing spot checks of travel expenses; and holding "surprise cash reviews" at revenue collection locations.

The City Council Finance Committee is scheduled to discuss the audit Tuesday night.

Posted by Bob
a resident of Professorville
on Sep 17, 2010 at 12:39 pm

Those folks in Revenue Collections are amazingly helpful, patient, and busy!

They handle the thousands of parking permits that need to be renewed quarterly - one at a time! They process all the individual utility bills and the many other types of payments at the counter, offering advice and researching issues on the spot. And that doesn't even mention any of cash handling responsibilities for all the off-site locations mentioned in this article.

Like most jobs, I'm sure they also handle numerous duties not listed in their job titles, and every time I've been there, they were always busy, always on task, and always helpful.

From someone that used to work with the public and has had to deal with the Revenue Collection team on a variety of different issues, I know it's a tough job, and they do it very well.

Posted by Arch Conservative
a resident of Menlo Park
on Sep 17, 2010 at 12:51 pm

"They" seem to do OK with cash- those mistakes are very minor and are insignificant- but with credit cards- that is where the big money is. And some will take advantage of it. Most won't, but why not just cancel all credit cards and then reimburse with full documentation? PA city workers have been known in the past to have taken unwarranted time off for other jobs in other towns, and few were ever punished. May be happening again.

Posted by Will
a resident of Charleston Meadows
on Sep 17, 2010 at 1:42 pm

> They handle the thousands of parking permits that need to be
> renewed quarterly - one at a time!

Really! This poster seems in awe of a department that does not seem to know anything about Information Technology. What is so complicated about about renewing parking permits that this job could not be done, properly, via a web-site, on a 7/24/365 basis?

This is another example of a city government looking backwards, not forwards.

Well, "in awe" might be a little strong, but I do think that as Accounting staff and not Information Technology experts, they do an excellent job in their focus area.

I don't know enough about their system to make such a bold statement or speak for them, but I suspect that everyone in Revenue Collections would be excited to hear the details of your plan on how to do the permits via a website Will.

Posted by who cares
a resident of Triple El
on Sep 21, 2010 at 8:24 am

Department heads (management employees) are now using their Executive Staff cards to buy meals for people who don't work for the city might be a concern? Jeez, I would think that constitutes fraud in using public tax dollars for unauthorized use but the auditor simply sweeps it under the carpet. Managers using the cards failed to submit the necessary forms for all purchaces for a quarter of all transactions and the auditor states that it might make it difficult to ensure the purchases were authorized? Good grief! Yeah I guess no documentation for use of public money by city employees might warrant further investigation but the auditor again brushes this aside and has more worry about how the cash register till was short $5 on occasions.Oh well....

Posted by Will
a resident of Charleston Meadows
on Sep 21, 2010 at 12:13 pm

The City hires an outside auditor to review its books once a year. Cash management is supposed to be a part of this audit. Yet, we keep seeing problems with cash management (remember, the Children's Theater was all about cash management).

How come no one is trying to find out why the outside Auditor is not catching these issues, or if they are even looking.

One of the rules of "auditing" is: "if you find one problem, you'll probably find more".

Posted by formercityemployee
a resident of another community
on Sep 22, 2010 at 9:08 pm

As a former city worker (retired now) for almost 15 years, I am not surprised. There has been so much abuse by management that it has become almost common practice to not report your expenses. No one checks and no one really cares. They see it as petty, small money. What they don't realize is that these expenses add up and show just one part of a large series of financial negligence being practiced.

Take it from someone who worked there for years...this is nothing new. I'm only surprised it took this long for it to come out.

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